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Belgian Central Bank Outlines Suitability Requirements for Management Body and Key Function Holders

The National Bank of Belgium (NBB) has issued a circular providing insight into how it conducts the assessment of suitability requirements for members of the management body and key function holders. The revised European Banking Authority (EBA) guidelines have clarified that knowledge, experience, and skill requirements include identifying, managing, and mitigating the risk of money laundering and terrorism financing.

Defining “Senior Managers”

The NBB recalls that “senior managers” refer to individuals who exercise a direct and decisive influence on activities at the highest level within an institution. These individuals should possess knowledge, experience, and skills appropriate to their function, which may vary depending on the institution’s nature, size, complexity, risk profile, and organizational structure.

Professional Behavior

Senior managers are expected to behave professionally, with their behavior assessed daily based on:

• Independence
• Management of conflicts of interest
• Time invested in their function
• Integrity and honesty (analyzed through a person’s history and criminal record)

Remuneration Requirements

The Banking Law sets out rules on remuneration, including the requirements for sound remuneration policies under Directive 2013/36/EU. The NBB has published guidelines outlining the objectives of remuneration policy, which must ensure:

• Prudent risk management
• Prevention of excessive risk-taking

Objectives of Remuneration Policy

The three objectives of a remuneration policy are:

1. To ensure sound and prudent risk management, preventing excessive risk-taking;
2. To align with the business strategy, objectives, values, and long-term interests of the bank, while avoiding conflicts of interest;
3. For the management body to adopt and review at least once a year the general principles of the remuneration policy.

Scope of Remuneration Policy

The remuneration policy applies to:

• All staff whose professional activities have a material impact on the bank’s risk profile
• Members of the management committee and key function holders
• Staff authorized to perform risky transactions in trade departments (considered “identified staff”)

Remuneration Policy Requirements

The remuneration policy must cover all types of remuneration, including:

• Variable remuneration
• Fixed basic salary
• Pension policy

The key principle is that the remuneration policy should reflect a balance between the fixed and variable components, with the variable component capped at 50% of the fixed part or EUR50,000.

Mandatory Disclosures

Banks must publish their remuneration policy and provide the published information to the NBB. They must also disclose:

• The number of staff members earning more than EUR1 million per financial year
  • Their job titles

The NBB has issued communications during the COVID-19 crisis, advising banks to set a conservative level for the variable portion of remuneration. Golden parachutes exceeding 12 months of remuneration require approval by the general meeting of shareholders and should reflect actual performance over the long term.

By adhering to these guidelines, financial institutions can ensure the suitability of their management body and key function holders, while maintaining a sound and prudent approach to remuneration policies.