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Sound and effective corporate governance arrangements are fundamental to the proper functioning of any financial institution and for the financial system they form as a whole.
A financial institution’s management body must have ultimate and overall responsibility for their financial institution and define, oversee and be accountable for the implementation of any governance arrangements within their institution that ensure effective and prudent management of the institution.
Considering the fundamental role and responsibilities of the management body in any financial institution and in view of ensuring sound and prudent management of any financial institution, members of the management body shall be of good repute, possess sufficient knowledge, skills and experience and commit sufficient time to the performance of their functions.
EU and national legislation require that financial institutions have robust governance arrangements, which include a clear organisational structure, well defined lines of responsibility, effective risk management processes, control mechanisms as well as all standards and principles concerned with setting an institution’s objectives, strategies and risk management framework; how its business is organised; how responsibilities and authority are defined and clearly allocated; how reporting lines are set up and what information they convey; and how the internal control framework is organised and implemented, including accounting procedures and remuneration policies. Internal governance also encompasses sound information technology systems, outsourcing arrangements and business continuity management.
These governance arrangements should in that respect be appropriate to the nature, scale and complexity of the financial institution.