The European Banking Authority and the European Securities and Markets Authority launched a consultation on guidance that aims to ensure sound governance at banks and investment firms by enhancing assessments of the fitness of these firms’ management.
“Weaknesses in corporate governance are widely acknowledged to have been one of the underlying causes of the financial crisis where inadequate oversight by, and challenge from, the management body in a number of credit institutions and investment firms contributed to excessive and imprudent risk-taking in the financial sector,” the regulators say.
The new guidance aims to address those weaknesses by providing common criteria for assessing the competence, independence and integrity of management; requiring management to devote sufficient time to its duties; accounting for diversity in the recruitment process; and highlighting the importance of proper training.
The consultation is open until Jan. 28, 2017, and regulators plan to hold a public hearing in London, U.K. over the issue on Jan. 5, 2017. Regulators across the European Union will be expected to implement the guidelines by mid-2017.