5. Specification of the governance system to be provided

Institutions and investment firms should indicate their governance system. For this exercise, the differentiation should be limited to either a unified board system (1-tier system) or a dual board system (2-tier system). Hybrid systems should be allocated to these systems as indicated in points

• (a) and (b) hereunder, independently of the existence of additional executive boards, audit, remuneration or nomination committees, or the fact that certain decisions are directly taken by shareholders rather than the management body.
• a. A 1-tier system should be understood as a system where all members of the management body in its management function and all members of the management body in its supervisory function form one management body with the responsibility to set the institution’s strategy, objectives and overall direction. Where there is, in addition to this unitary board, a mandatory executive board, institutions and investment firms should still be considered to have a 1-tier structure.
• b. A 2-tier system should be understood as a system where the management body in its management function (executive directors, including the CEO) forms a distinct body from

7 The EBA provides a link to the information on its website together with these guidelines; the exchange rate can also be accessed at http://ec.europa.eu/budget/contracts_grants/info_contracts/inforeuro/inforeuro_en.cfm

14 the body that consists only of the members of the management body in their supervisory function (non-executive directors), i.e. a unitary board does not exist at all.