9.3 Independent members of a relevant institution’s management body in its supervisory function

Having independent members, as referred to in paragraph 80, and non-independent members in the management body in its supervisory function is considered good practice for all relevant institutions.

When determining the sufficient number of independent members, the principle of proportionality should be taken into account. Members representing employees in the management body should not be taken into account when determining the sufficient number of independent members in the management body in its supervisory function. Without prejudice to any additional requirements imposed by national law the following should apply:

• a. the following relevant institutions should have a management body in its supervisory function that includes a sufficient number of independent members:
• i. significant CRD institutions;
• ii. listed relevant institutions;
• b. relevant institutions that are neither significant nor listed should, as a general principle, have at least one independent member within the management body in its supervisory function. However, competent authorities may not require any independent directors within:
• i. relevant institutions that are wholly owned by a relevant institution, in particular when the subsidiary is located in the same Member State as the parent relevant institution;
• ii. investment firms that meet the criteria set out in point (a) of Article 32(4) of Directive 2019/2034/EU or the other criteria established by a relevant Member State in accordance with paragraphs (5) and (6) of Article 32 of Directive No 2019/2034/EU.
• c. Within the overall responsibility of the management body, the independent members should play a key role in enhancing the effectiveness of checks and balances within the relevant institutions by improving oversight of management decision-making and ensuring that:
• d. the interests of all stakeholders, including minority shareholders, are appropriately taken into account in the discussions and decision-making of the management body. Independent members could also help to mitigate or offset undue dominance by individual members of the management body representing a particular group or category of stakeholders;
• e. no individual or small group of members dominates decision-making; and
• f. conflicts of interest between the institution, its business units, other entities within the accounting scope of consolidation and external stakeholders, including clients, are appropriately managed.

Without prejudice to paragraph 91, in the following situations it is presumed that a member of a relevant institution ’s management body in its supervisory function is regarded as not ‘ being independent ’ :

• a. the member has or has had a mandate as a member of the management body in its management function within an institution within the scope of prudential consolidation, unless he or she has not occupied such a position for the previous five years;
• b. the member is a controlling shareholder of the relevant institution, being determined by reference to the cases mentioned in Article 22(1) of Directive 2013/34/EU, or represents the interest of a controlling shareholder, including where the owner is a Member State or other public body;
• c. the member has a material financial or business relationship with the relevant institution;
• d. the member is an employee of or is otherwise associated with a controlling shareholder of the relevant institution;
• e. the member is employed by any entity within the scope of consolidation, except when both of the following conditions are met:
• i. the member does not belong to the institution ’ s highest hierarchical level, which is directly accountable to the management body;
• ii. the member has been elected to the supervisory function in the context of a system of employees ’ representation and national law provides for adequate protection against abusive dismissal and other forms of unfair treatment;
• f. the member has previously been employed in a position at the highest hierarchical level in the relevant institution or another entity within its scope of prudential consolidation, being directly accountable only to the management body, and there has not been a period of at least three years between ceasing such employment and serving on the management body;
• g. the member has been, within a period of three years, a principal of a material professional adviser, an external auditor or a material consultant to the relevant institution or another entity within the scope of prudential consolidation, or otherwise an employee materially associated with the service provided;
• h. the member is or has been, within the last year, a material supplier or material customer of the relevant institution or another entity within the scope of prudential consolidation or had another material business relationship, or is a senior officer of or is otherwise associated directly or indirectly with a material supplier, customer or commercial entity that has a material business relationship;
• i. the member receives, in addition to remuneration for his or her role and remuneration for employment in line with point (c), significant fees or other benefits from the relevant institution or another entity within its scope of prudential consolidation;
• j. the member served as a member of the management body within the entity for 12 consecutive years or longer;
• k. the member is a close family member of a member of the management body in the management function of the relevant institution or another entity in the scope of prudential consolidation or a person in a situation referred to under points (a) to (h).

The mere fact of meeting one or more situations under paragraph 89 does not automatically qualify a member as not being independent. Where a member falls under one or more of the situations set out in paragraph 89, the relevant institution may demonstrate to the competent authority that the member should nevertheless be considered as ‘being independent’ . To this end relevant institutions should be able to justify to the competent authority the reasoning why the member ’ s ability to exercise objective and balanced judgement and to take decisions independently is not affected by the situation.

For the purpose of paragraph 90 relevant institutions should consider that being a shareholder of a relevant institution, having private accounts or loans or using other services, other than in the cases explicitly listed within this section, should not lead to a situation where the member is considered to be non-independent if they stay within an appropriate de minimis threshold. Such relationships should be taken into account within the management of conflicts of interest in accordance with the relevant EBA Guidelines on Internal Governance.