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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.
While implementing robust internal governance arrangements, support PFS shall comply with the legal provisions of the Law of 5 April 1993 on the financial sector and in particular Article 17(2).
Those legal requirements are completed by the following main CSSF circulars applicable to support PFS:
In line with the legal requirements, members of a support PFS management body shall be authorised by the CSSF and produce evidence of adequate professional experience as well as of their professional standing.
Such professional standing shall be assessed on the basis of police records and of any evidence tending to show that the persons concerned are of good standing and are offering a guarantee of irreproachable conduct. Any proposed member of support PFS management body needs in that respect to provide the CSSF with the following information:
The persons to be appointed by a support PFS to be responsible for managing the internal audit function (i.e. internal auditor) shall be notified to the CSSF. The notification to the CSSF shall also encompass the same set of information as the one related to the appointment of members of the management body meaning: