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Malta: ESMA Guidelines Aim to Enhance Governance of EU Banks

Strengthening Governance and Preventing Future Crises

In a move aimed at strengthening the governance of European Union banks, the European Securities and Markets Authority (ESMA) has published revised guidelines on the assessment of suitability of members of management bodies and key function holders. These guidelines take effect in June 2018 and are part of a broader effort by ESMA and the European Banking Authority (EBA) to address weaknesses revealed during the financial crisis.

Sound Management Practices

The guidelines highlight the importance of sound management practices in maintaining trust in the financial system and preventing future crises. They also emphasize the need for banks to:

  • Establish a clear risk culture
  • Define a risk appetite framework that is consistent with their business strategy
  • Implement robust internal governance processes

In addition, the guidelines stress the importance of:

  • Ensuring effective information flow between committees, management, and regulators
  • Setting up conflict of interest policies and internal whistleblowing procedures
  • Providing detailed requirements for the second and third lines of defense

Aligning Existing Guidance with New Requirements

The revised guidelines aim to align existing guidance with new requirements introduced under CRD IV and MiFID II. Under the revised framework, national competent authorities are required to evaluate all members of management bodies using a set of common criteria that include:

  • Knowledge
  • Integrity
  • Skill
  • Independence of mind
  • Experience
  • Time commitment
  • Reputation
  • Diversity
  • Honesty

Assistance for Financial Institutions in Malta

Deloitte Malta, a leading professional services firm, is offering assistance to financial institutions in Maltese seeking to comply with the revised guidelines. The firm’s Risk Advisory business can help clients:

  • Conduct gap analyses on policies and procedures
  • Evaluate board members’ suitability using a range of techniques
  • Provide training on risk and regulatory topics

For more information, contact Ian Coppini, Risk Advisory Business Leader at Deloitte Malta.