What does EBA say about appointments to the management and supervisory boards of banks?

The HNB has published guidelines that establish the procedure, criteria, and minimum requirements regarding the assessment of the suitability of members of the management body and holders of key functions in a credit institution.

Article 11, paragraph (1) of Directive 2006/48/EC stipulates that a credit institution will only receive authorization to operate if there are at least two suitable persons who actually manage the business, and requests EBA to develop guidelines for assessing the suitability of persons who actually manage the business of the credit institution.

Deficiencies in corporate governance, including inadequate oversight and review by the supervisory function of the management body in some credit institutions, have contributed to excessive and imprudent risk-taking in the banking sector, which in turn has led to the failure of certain credit institutions and problems in the system. Therefore, the scope of these guidelines is not limited to members of the management body performing its administrative function, but extends to members performing supervisory functions to ensure appropriate oversight of the management of the credit institution, including its decisions on risk-taking, as emphasized by the HNB.

This is in line with the proposal for the Directive on the access to the activities of credit institutions and the supervision of credit institutions and investment firms (CRD IV) by the EU Commission dated July 20, 2011. The ongoing suitability of all members of the management body is crucial for the proper functioning of the credit institution. The Guidelines also specify requirements regarding the assessment of holders of key functions who play a crucial role in the daily management of operations. These measures are considered necessary and appropriate to ensure a reliable management system in credit institutions, as stipulated in Article 22 of Directive 2006/48/EC. 

Since financial and mixed financial holding companies are also required to have   suitable persons to manage the business, and these companies have a significant impact on credit institutions, the scope of the Guidelines also includes them. 
Credit institutions should assess the suitability of members of the management body before or immediately after their appointment and notify the competent authority of their appointments. Some competent authorities may require prior approval.
The competent authorities will also assess the suitability of proposed or appointed members of the management body. The Guidelines specify several criteria to be considered in that assessment. In cases where a member of the management body is not suitable, the credit institution and, if necessary, the competent authority should take appropriate measures. 

EBA has conducted a high-level impact assessment of the proposals included in the guidelines, which is presented in Section 4. This impact assessment, along with the impact assessment conducted by the European Commission, should be interpreted in the context of the proposed Directive of the European Parliament and Council on the access to the activities of credit institutions and the supervision of credit institutions and
investment firms (the proposal for CRD IV, published on July 20, 2011). The European Commission’s proposal includes a requirement for the assessment of the suitability of all members of the management body.
The Commission analyzed the impact of the assessment process for all members of the management, concluding that while such a requirement would incur costs, they would be negligible compared to the benefits. The guidelines proposed in this document will not incur significant additional costs and will help achieve the benefits identified in the impact assessment conducted by the European Commission.
Competent authorities and credit institutions must comply with these Guidelines by May 22, 2013. You can view the HNB guidelines here.