EBA reviews its guidelines on internal governance

The European Banking Authority (EBA) launched today a public consultation on its revised Guidelines on internal governance. These draft Guidelines aim at further harmonising institutions’ internal governance arrangements, processes and mechanisms across the EU, in line with the new requirements in this area introduced in the Capital Requirements Directive (CRD) and also taking into account the proportionality principle. The consultation runs until 28 January 2017.

Weaknesses in corporate governance in a number of institutions have contributed to excessive and imprudent risk-taking in the banking sector, which has led to the failure of individual institutions and systemic problems in Member States and globally. In order to address the potentially detrimental effects of poorly designed corporate governance arrangements on the sound management of risk, and to take into account the new requirements introduced in the CRD in this area, the EBA is updating its Guidelines on internal governance, originally published on 27 September 2011.

These draft Guidelines put more emphasis on the duties and responsibilities of the management body in its supervisory function in risk oversight, including the role of their committees. They aim at improving the status of the risk management function, enhancing the information flow between the risk management function and the management body and ensuring effective monitoring of risk governance by supervisors. The ‘know-your –structure’ and complex structures sections, especially following the ‘Panama events’, have been strengthened to ensure that the management body is aware of the risks that can be triggered by complex and opaque structures and to improve transparency. In addition, the framework for business conduct has been further developed and more emphasis is given to the establishment of a risk culture, a code of conduct and the management of conflicts of interest.

Finally, more guidance is provided on the risk management framework, on how internal control functions are organised and how internal controls are implemented.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the “send your comments” button on the consultation page. Please note that the deadline for the submission of comments is 28 January 2017.

A public hearing will take place at the EBA premises on 5 January 2017 from 14: 00 to 17:00 UK time. All contributions received will be published following the end of the consultation, unless requested otherwise. The EBA statement and related information can be found here.

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

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