ecoDa/EBF Conference on Fit& Proper 25 October 2017, Brussels

30.10.2017

Interesting discussion at the ecoDa/EBF Conference on Fit& Proper Test in the financial institutions (October 25).

 

ecoDa took the initiative of organising a conference together with the European Banking Federation on Boards’ efficiency and fit proper rules in financial organizations on October 25. The conference included speakers from the European Central Bank (ECB), the European Banking Authority (EBA), and national financial supervisory authorities.  Paola Schwizer, Chair of Nedcommunity, ecoDa board member moderated in a very efficient way the debate. Lutgart Van den Berghe, Executive Director at Guberna, Chair of ecoDa Policy Committee Took part in the discussions.

 

Main outcome:

 

  • According to ECB: in terms of boards’ effectiveness, big progresses have been made in terms of assessment, drafting of the minutes and documentation circulated prior to board meetings. Some improvements are still needed with regards to the challenging capacity of boards, their composition, their skills and the risk appetite framework. There are still deficiencies in inter-play between risk appetite framework and strategic processes. The overall oversight of the board in its supervisory function is not strong enough.
  • The ECB has conducted six pilot exercises using the methodology of the Netherlands where psychologists assess collective board behaviors by attending the board meetings. 
  • In Germany, the BaFin has not the resources to interview each board member. They will apply a proportionality rule and conducts the interviews only for significant banks.
  • Time commitment is difficult to assess: you have to trust people. Time commitment varies for a commercial organization or a nonprofit organization.
  • When minutes are too detailed, people refrain to speak. Formal meetings need to be documented and people need to express themselves freely. However other fora (similar to cabinet meetings) are needed to allow people to express themselves freely.
  • The assessment of collective suitability is not relevant every year. To avoid superficial evaluation, it should be done every three years.

 

Speakers’ slides are available here.