20. Ongoing monitoring and re-assessment of the individual and collective suitability of the members of the management body

The ongoing monitoring of the individual or collective suitability of the members of the management body should focus on whether the individual member or the members collectively remain suitable, taking into account the individual or collective performance and the relevant situation or event which caused a re-assessment and the impact it has on the actual or required suitability.

When re-assessing the individual or collective performance of the members of the management body, the members of the management body in its supervisory function or, where established, the nomination committee, should consider in particular:

• a. the efficiency of the management body’s working processes, including the efficiency of information flows and reporting lines to the management body taking into account the input from internal control functions and any follow-up or recommendations made by those functions;
• b. the effective and prudent management of the institution, including whether or not the management body acted in the best interest of the institution including in relation to the fight against money laundering and terrorist financing;
• c. the ability of the management body to focus on strategically important matters;
• d. the adequacy of the number of meetings held, the degree of attendance, the appropriateness of time committed and the intensity of directors’ involvement during the meetings;
• e. any changes to the composition of the management body and any weaknesses with regard to individual and collective suitability, taking into account the inst itution’s business model and risk strategy and changes thereto;
• f. any performance objectives set for the institution and the management body;
• g. the independence of mind of members of the management body, including the requirement that decision-making is not dominated by any one individual or small group of individuals, and the compliance of members of the management body with the conflict of interest policy;
• h. the degree to which the composition of the management body has met the objectives set in the institutio n’s diversity policy in line with Title V ; and
• i. any events that may have a material impact on the individual or collective suitability of the members of the management body, including changes to the institution’s business model, strategies and organisation;
• j. reasonable grounds to suspect that money laundering or terrorist financing is being or has been committed or attempted or other financial crimes, or there is an increased risk thereof, including following such adverse findings made by the internal or external auditors or competent authorities regarding the adequacy of the institution’s AML/CFT systems and controls .

When a re-assessment is triggered, due consideration should be given to:

• a. the assigned duties and reporting lines within the institution, including where applicable within the group, in order to establish whether any material fact or finding should be allocated to one or more responsible members of the management body. In this context, assigned duties should be determined taking into account all relevant documentation, including but not limited to governance charters and codes, internal organigrams and other forms of designating areas of responsibility, internal policies, assessments of the suitability available and additional information provided in this context, letters of appointment or job descriptions, and minutes of meetings of the management body; and
• b. the credibility and reliability of any fact that triggered the re-assessment, and the seriousness of any allegations of or actual wrongdoing of one or more members of the management body. Institutions should determine the credibility and reliability of information (e.g. the source, the plausibility, any conflicts of interest of the source giving the information) among other considerations. Institutions should note that the absence of criminal convictions alone may not be sufficient to dismiss allegations of wrongdoing.

Significant CRD institutions should perform a periodic suitability re-assessment at least annually. Non-significant institutions should perform a suitability re-assessment at least every two years. Institutions should document the results of the periodic re-assessment. Where a re-assessment is triggered by a specific event, institutions may focus the re-assessment on the situation or event that has triggered the re-assessment, i.e. where certain aspects have not changed, these can be omitted from the assessment.

The result of the re-assessment, the reason for the re-assessment and any recommendation with regard to identified weaknesses should be documented and submitted to the management body.

The management body in its supervisory function or, where established, the nomination committee should report the result of the assessment of collective suitability to the management body even if no changes to its composition or other measures are recommended. Recommendations may include, but are not limited to, training, change of processes, measures to mitigate conflicts of interest, the appointment of additional members with a specific competence and the replacement of members of the management body.

The management body in its management function should take note of the report and decide on the recommendations made by the management body in its supervisory function or, where established, the nomination committee, and where recommendations are not adopted, document the underlying reasons.

Institutions should inform the competent authority where re-assessments due to material changes occurred. Significant CRD institutions should inform the competent authority at least annually of any re-assessments of collective suitability made.

Institutions should document the re-assessments, including their outcome and any measures taken as a result of the re-assessment. Institutions should submit the documentation supporting the re-assessment at the request of the competent authority.

In the event that the management body concludes that a member of the management body is not suitable individually, or where the management body is not suitable collectively, the institution should immediately inform the competent authority without delay, including about the measures proposed or taken by the institution to remedy the situation.