1. The institutions ’ assessment of the individual suitability of members of the management body

Institutions should have the primary responsibility for ensuring, in accordance with Article 91(1) of Directive 2013/36/EU, that the members of the management body are individually suitable at all times and should assess or re-assess the suitability, in particular:

• a. when applying for authorisation to take up the business;
• b. when material changes to the composition of the management body occur, including:
• i. when appointing new members of the management body, including as a result of a direct or indirect acquisition or increase of a qualifying holding in an institution¹⁸ . This assessment should be limited to newly appointed members;
• ii. when re-appointing members of the management body, if the requirements of the position have changed or if the member is appointed to a different position within the management body. This assessment should be limited to the members whose position has changed and to the analysis of the relevant aspects, taking into account any additional requirements for the position;
• c. on an ongoing basis in accordance with paragraphs 26 and 27.

¹⁸ Please also refer to the (draft) RTS under Article 7(4) of Directive 2014/65/EU and draft ITS under Article 7(5) of Directive 2014/65/EU on the procedures for granting and refusing requests for authorisation of investment firms, available on ESMA’s website . See also (draft) ITS on the procedures and forms in respect of acquisitions and increases of qualifying holdings in credit institutions and investment firms respectively, available on the EBA and ESMA websites: https://www.eba.europa.eu/regulation-and-policy/other-topics/its-on-the-procedures-and-forms-in-respect-of-acquisitions-and-increases-of-qualifying-holdings and https://www.esma.europa.eu/sites/default/files/library/2015/11/2015-613_final_report_and_assessment_rts_its.pdf

The initial and ongoing assessment of the individual suitability of the members of the management body is the responsibility of institutions, without prejudice to the assessment carried out by competent authorities for supervisory purposes.

Institutions should assess, in particular, whether or not the members:

• a. are of sufficiently good repute;
• b. possess sufficient knowledge, skills and experience to perform their duties;
• c. are able to act with honesty, integrity and independence of mind to effectively assess and challenge the decisions of the management body in its management function and other relevant management decisions where necessary and to effectively oversee and monitor management decision-making;
• d. are able to commit sufficient time to performing their functions in the institution and, where the institution is significant, whether or not the limitation of directorships under Article 91(3) of Directive 2013/36/EU is being complied with.

Where an assessment is made for a specific position, the assessment of sufficient knowledge, skills, experience and time commitment should take into account the role of the specific position concerned. The level and nature of the sufficient knowledge, skills and experience required from a member of the management body in its management function may differ from that required from a member of the management body in its supervisory function, in particular if these functions are assigned to different bodies.

Institutions should monitor on an ongoing basis the suitability of the members of the management body to identify, in the light of any relevant new fact, situations where a re-assessment of their suitability should be performed. In particular, a re-assessment should be performed in the following cases:

• a. when there are concerns regarding the individual or collective suitability of the members of the management body;
• b. in the event of a material impact on the reputation of a member of the management body, or the institution, including cases where members do not comply with the institution’s conflict of interest policy;
• c. 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:
• i. has not implemented appropriate internal controls or oversight mechanisms to monitor and mitigate ML/TF risks (e.g. identified by supervisory findings from on-site inspections or off-site inspections, supervisory dialogue or in the context of sanctions);
• ii. has been found to be in breach of its AML/CFT obligations in the home or host Member State or in a third country;
• iii. has materially changed its business activity or business model in a manner that suggests that its exposure to ML/TF risk has significantly increased; or
• d. in any event that can otherwise materially affect the suitability of the member of the management body.

Institutions should also re-assess the sufficient time commitment of a member of the management body if that member takes on an additional directorship or starts to perform new relevant activities, including political ones.

Institutions should base their suitability assessments on the notions defined in Title III, taking into account the diversity of the management body as specified in Title V, and should implement a suitability policy and processes as set out, respectively, in Titles VI and VII.