Do senior bank staff, including non-executive directors, have to be registered with your national regulatory authority?
The Law of April 25, 2014 on the status and supervision of credit institutions and listed companies (Banking Law) gives the National Bank of Belgium (NBB) supervisory powers over individuals that carry on some important functions within credit institutions governed by Belgian law (Credit Institutions) and listed companies. These functions include: (i) directors; (ii) members of the management committee; (iii) heads of “independent control functions” (i.e., internal audit, compliance and risk management); and (iv) senior managers (altogether Controlled Functions).
The appointment of individuals to Controlled Functions must be approved by the NBB after prior consultation, in certain cases, with the Financial Services and Markets Authority (FSMA). Such approval takes place either (i) at the same time as the Credit Institution’s application for authorization/registration, or (ii) when an already authorized/registered Credit Institution plans to (re)appoint an individual to a Controlled Function. The NBB also carries out ongoing supervision of the individuals performing Controlled Functions to ensure their continuing suitability for such functions.
If your national regulatory authority requires registration of senior bank staff what are the requirements?
As explained above, the appointment of individuals to Controlled Functions is subject to prior approval by the NBB. Such individuals are first selected by the relevant Credit Institutions and subject to further assessment/approval by the NBB.
The NBB's assessment and approval procedure is a thorough process. Credit Institutions and individuals should consult the appropriate page on the NBB's website
In particular, individuals are assessed against two broad standards (so-called “fit and proper” standards): (i) necessary expertise; and (ii) professional integrity (including the absence of convictions). For the purposes of its assessment, the NBB initially relies on the information provided by the Credit Institutions and the individuals in question. This information is collected by means of standard request forms, which are available from the NBB's website. The NBB is also entitled to request any additional information it deems necessary and, where appropriate, interview the relevant candidates. In addition an interview will always take place for (candidate) executive directors and chairmen of the management body/specialist committee set up by the management body of Credit Institutions of “systemic importance” (i.e., whose failure would have a major impact on Belgium or one or more other Member States, or the global financial market).
The NBB must take a decision within a reasonable period of time. In general, the NBB endeavors to deal with approval requests within one month in non-complex cases, and two months in complex cases (for instance those requiring an interview), from the date of receipt of the duly completed request forms. These indicative time-frames are suspended when the NBB requests additional information from the Credit Institutions until receipt of such information.
When an individual is being proposed for a Controlled Function for the first time, the NBB must first consult with the FSMA. The FSMA must communicate its opinion to the NBB within one week from the date of request for its opinion.
Finally, as mentioned above, the NBB carries out an ongoing supervision of the individuals performing Controlled Functions to ensure their continuing compliance with the “fit and proper” standards. Whenever the NBB becomes aware of any facts or information that may raise doubts as to the suitability of an individual holding a relevant Controlled Function, the NBB will carry out a more in-depth examination and, if required, a reassessment. Such facts or information may include the opening of criminal, civil, administrative, or disciplinary proceedings; an unexpected change in the Credit Institution’s results; concerns about the business model applied; the extension of the Credit Institution’s activities abroad; significant staff rotation; poor administration; (repeated) breaches of law and regulations; etc.
In the case of a reassessment, the NBB may determine whether any steps need to be taken to remedy the situation. A period of grace may be granted (e.g., in order to follow a specific training course). The NBB may also order the Credit Institution itself to draw up a plan of approach setting out the steps to be taken to avoid any repetition of the detected problems in future. If necessary, the NBB may decide that the individual concerned may no longer take up his or her position.
Is there legislation specific to the banking sector that provides for penalties to be levied against senior staff for mis-managing a bank?
As part of its prudential control responsibilities, the NBB can carry out on-site inspections on the premises of Credit Institutions and examine and copy any information held by them, inter alia, to verify compliance with the applicable legal provisions and ensure sound and prudent management of the Credit Institutions. The NBB’s guidelines on the methodology used for carrying out inspections, the inspection process, and the expected behaviour of the Credit Institutions can be found on the appropriate page on the NBB’s website.
According to Article 347 of the Banking Law, if the NBB finds a violation of the provisions of the Banking Law and the implementing measures thereof, of Regulation n° 575/2013, of Regulation n° 600/2014 or of Title II of Regulation (EU) n° 648/2012, the NBB, at the request of the European Central Bank or on its own initiative, can impose an administrative fine on the Credit Institution concerned and on the members of its management body or on individuals who, in the absence of a management committee, participate in the effective management of the Credit Institution. The amount of fine that can be imposed by the NBB on such individuals varies between €5,000 and €5,000,000, depending on the following factors:
- The gravity and duration of the misconduct;
- The degree of responsibility of the individual;
- The financial strength of the individual (determined on the basis of the individual’s annual income);
- Any potential profits or benefits obtained from the misconduct;
- Injury suffered by third parties as a result of the misconduct, to the extent it can be determined;
- The degree of cooperation with the competent authorities;
- Previous violations; and
- The potential adverse impact of the misconduct on the stability of the financial system.
According to Article 348 of the Banking Law, certain violations of the above mentioned acts can also be subject to criminal sanctions of up to 2 years in prison and up to €10,000 in fines.
What is the maximum amount the regulator can fine an individual?
The maximum amount the NBB can fine an individual is €5,000,000.
Is there legislation in place that requires banks to have in place remuneration policies and practices that are consistent with effective risk management?
The Banking Law requires all Credit Institutions to have a remuneration policy that ensures sound and effective risk management and prevents the taking of risk that exceeds the tolerance level set by the Credit Institution.
In particular, the remuneration policy must be consistent with the business strategy, objectives, values and long-term interests of the Credit Institutions and include measures to avoid conflicts of interest. In this regard, the Banking Law imposes certain common principles that Credit Institutions must observe when establishing and applying their remuneration policy, depending on the size and internal organization of the Credit Institution and the nature, scope and complexity of its activities. These common principles are set out in Annex II of the Banking Law. The remuneration policy of the Credit Institutions must be evaluated at least once a year.
The remuneration policy must cover all types of remuneration, including variable remuneration and discretionary pension benefits and operate a clear distinction to determine the criteria for fixing:
- The fixed basic salary, which must reflect primarily the relevant professional experience and the organizational responsibilities as outlined in the job description; and
- Variable remuneration based on the performance criteria, which must reflect sustainable performance adapted to the level of risk, and additional services provided in addition to those set out in the job description.
The remuneration policy must cover the members of the management body, as well as categories of staff whose professional activities have a material impact on the risk profile of the Credit Institution, including senior management and individuals occupying a function involving the taking of risks, individuals who hold independent control functions, as well as employees whose total remuneration puts them on the same level as senior managers or who hold a position involving the taking of risks.
Is there any legislation planned in your jurisdiction that will strengthen the accountability of senior bank staff?
We are not aware of any other planned legislation in Belgium that will strengthen the accountability of senior bank staff.