Do senior bank staff, including non-executive directors, have to be registered with your national regulatory authority?
The Act on the Financial Supervision (Wet op het financieel toezicht, the AFS), requires the day-to-day management of a bank to be conducted by at least two persons who have been assessed and approved by the Dutch Central Bank (De Nederlandsche Bank, the DNB). Such persons are known as “day-to-day policymakers” and can be either executive or non-executive directors. The DNB will assess a day-to-day policymaker by examining whether the proposed person fulfills the requirements on suitability (geschiktheid) and integrity (betrouwbaarheid). The requirements in relation to suitability are laid down in the Policy Rule on suitability 2012 (Beleidsregel geschiktheid 2012). The requirements in relation to integrity are laid down in the Policy Rule on integrity (Beleidsregel betrouwbaarheidstoetsing).
Furthermore, the integrity and suitability of the members of a bank’s supervisory board (raad van commissarissen) will be assessed by the DNB prior to their appointment.
In addition, other persons with senior management functions (2nd echelon) will also be assessed for suitability and integrity. However, these screenings will have to be conducted by the bank itself. The DNB will assess the general procedures that are described by the bank and will review the integrity screening performed by the bank.
If your national regulatory authority requires registration of senior bank staff what are the requirements?
Day-to-day policymakers and co-policymakers will be tested on integrity and suitability as set out below.
Suitability assessment: suitability consists of knowledge, skills and professionalism. These three factors can be derived from a person’s education, work experience, his or her competence and his or her continuous application thereof. The suitability screening depends on the relevant prospective person, because a person’s suitability depends on their specific position, the corporate environment they work in and on the composition of the board comprising the other day-to-day policymakers with whom they will work.
There are a number of areas in which the DNB will assess the suitability of day-to-day policymakers and co-policymakers. These include:
- governance, organizational and communication skills;
- knowledge of products, services and markets in which the bank is actively involved;
- business ethics; and
- history of balanced and consistent decision-making.
Suitability screening takes account of:
- the position of the day-to-day policymaker; and
- the nature, scope, complexity and risk profile of the bank.
Integrity assessment: Integrity of the (prospective) day-to-day policymaker and co-policymakers has to be established beyond doubt. Integrity is mainly established by reviewing criminal, tax, or other relevant antecedents of the prospective day-to-day policymaker.
In addition, the Dutch Securities Institute (DSI) promotes and monitors the integrity and reliability of the financial sector by doing pre-employment screenings of employees (except for employees that have already been screened by the DNB or the AFM) of, among others, banks. The DSI performs screenings in respect of employees who will work in an ‘integrity-sensitive’ function. The DSI is supported by the Dutch financial services sector and provides a form of self-regulation. Once a person applies for screening, the DSI checks and verifies the necessary data. The DSI produces a report of its findings, noting any relevant particulars, and sends it to the person in question. It is up to that person to decide whether they will disclose the report to their prospective employer. The bank remains responsible for determining whether a person would be suitable for the available role.
Is there legislation specific to the banking sector that provides for penalties to be levied against senior staff for mis-managing a bank?
In principle the DNB can impose an administrative order with a fine (last onder dwangsom) or an administrative fine (bestuurlijke boete) on a bank which breaches applicable rules and regulations.
In addition, the DNB can impose an administrative fine on those individuals who: (1) exercise actual control (feitelijk leidinggevende) at the time a bank is in breach of the applicable regulatory rules and regulations; or (2) give instructions for a bank to commit such a breach (individuals de facto in charge). In both cases this includes, but is not limited to, senior bank staff.
An individual will be de facto in charge if: (i) they fail to take measures to prevent the prohibited conduct while generally being aware of the risk that such conduct may arise; or (ii) they decided the action with regard to the prohibited conduct.
What is the maximum amount the regulator can fine an individual?
The AFS introduces three categories of fines:
- Category 1: minor offenses (e.g. not reporting to the DNB in good time). For this category there is a fixed fine of €10,000.
- Category 2: more serious offenses (e.g. failure to fulfill one’s duty of due care). For this category there is a fixed fine of €500,000 although depending on the circumstances of the matter this may be increased up to a maximum of €1,000,000. Such circumstances include the gravity and duration of the offense and the degree to which the offense can be imputed to the individual. In addition, the DNB must take the offender’s financial capacity into account. In certain cases the maximum can be increased up to a maximum of € 2,500,000.
- Category 3: serious offenses (e.g. performing regulated activities without the required permits). For this category there is fixed fine of €2,500,000 although depending on the circumstances of the matter this may be increased up to a maximum of €5,000,000. Like a category 2 fine such circumstances include the gravity and duration of the offense and the degree to which the offense may be imputed to the individual. In addition, the DNB must take the offender’s financial capacity into account. In certain cases the maximum can be increased up to a maximum of € 20,000,000.
All fines can be decreased depending on any mitigating factors.
The Decree on Administrative Fines in the Financial Sector (Besluit bestuurlijke boetes financiële sector) sets out further rules for determining the administrative fines imposed under the AFS.
All three categories of fines can be imposed upon a bank as well as senior staff, depending on the specific circumstances of the matter.
Is there legislation in place that requires banks to have in place remuneration policies and practices that are consistent with effective risk management?
The Sound Remuneration Policy Regulation 2014 (Regeling beheerst beloningsbeleid Wft 2014, the Regulation) sets out rules regarding remuneration policies. The Regulation deals with the following issues:
- the manner in which banks’ remuneration policies are formulated and determined or approved, implemented, evaluated and adjusted;
- the manner in which remuneration components and remuneration structures are shaped and the manner in which the risks ensuing from remuneration policies and their implementation are controlled; and
- the content and the manner of disclosure of remuneration policies.
In 2015 the Dutch Financial Undertakings (Remuneration Policy) Act (Wet beloningsbeleid financiële ondernemingen, the Remuneration Act) was implemented in the AFS. The Remuneration Act has introduced, among other things, the following:
- a maximum variable bonus of up to 20% of an individual’s fixed remuneration received that year. This cap is not only applicable to “identified staff” (as defined under current Dutch legislation), but includes all natural persons employed by the bank (or one of its group companies);
- guaranteed bonuses will be prohibited; and
- severance payments for a management board member will be capped at 100% of the annual, fixed component of the individual's remuneration.
The bonus cap of up to 20% is not applicable to Dutch branches of foreign banks (as defined under the Capital Requirements Regulation). The remuneration rules (and caps) of their home country will be applicable.
Are there any developments in your national legislation that cause a strengthening of the accountability of senior bank staff?
Following the financial crisis, the so-called ‘banker’s oath’ was introduced in the Netherlands. The banker’s oath makes it mandatory for certain individuals to swear an oath or declaration, within three months of their appointment. The oath or promise will be mandatory for the following categories of persons that are employed by a bank with its statutory seat in the Netherlands (and employees of the Dutch branch office of a non-EU bank):
- persons that have an employment contract with the bank; and
- persons carrying out activities that are part of the business of the relevant bank.
By the oath or promise, the above mentioned persons promise to carry out their duties to the best of their ability and with integrity.
The Regulation on oath or declaration for the financial sector 2015 (Regeling eed of belofte financiële sector 2015) provides for further details on the oath and declaration, including, but not limited to, the text of the oath and declaration.