The Council of Ministers today approved the royal decree amending various standards regarding requirements of good repute, experience and good governance in credit institutions and other financial entities. The aim is to incorporate into the Spanish legal framework the recommendations of the European Banking Authority (EBA for its acronym in English) in this regard, which means expanding current requirements and promoting continuous control by both the Bank of Spain and the own entities.
The EBA established in November 2012 a series of guidelines on the assessment of the suitability of directors and managers in credit institutions. Despite their non-binding nature, national supervisors must communicate whether they comply with these recommendations before May 22 and, if not, explain the reasons. Previously, on January 22, national supervisors had to express their intentions in this regard. Spain has already communicated its intention to abide by the guidelines, along with other measures, to improve confidence in the financial system.
The norm equally affects banks, savings banks, credit cooperatives, financial conglomerates, appraisal companies, financial credit institutions, payment entities and electronic money entities.
The royal decree expands the current levels of requirement for the suitability in the exercise of the functions of director, general director and similar. In the matter of honorability, the supervisor will assess his professional career, convictions for intentional crimes and the existence of founded investigations in relation to economic crimes. Regarding the consideration of intentional crimes, the Bank of Spain may seek the opinion of an expert commission created for this purpose.
Regarding the experience requirements, not only the professional trajectory but also the theoretical training will be valued, particularly in the areas of banking and financial services. The evaluation will cover the board as a whole taking into account the different profile of its members and not only individually as it has been up to now.
In matters of good governance, not only will conflicts of interest arising from close ties or control between natural or legal persons be taken into account. Non-suitability will also be established based on the existence of conflicts of interest due to the performance of past or present positions, personal and financial relationships with other members of the board of directors, or the fact that a director cannot devote sufficient time to their duties. .
The entities will have a period of six months to replace the directors or managers who, in accordance with the new requirements regarding commercial and professional honor, knowledge, experience and good governance, must lose the suitability necessary to carry out their functions in the entity.
On the part of the supervisor, the Bank of Spain in this case, and the entities themselves will establish continuous control over compliance with these requirements. Entities must have internal units and procedures so that they can carry out this permanent evaluation.
On the other hand, the royal decree makes the necessary formal adjustment in the regulation level regulation after the transfer to the Bank of Spain of the powers of authorization and sanction of credit institutions. This transfer by the Ministry of Economy was made in August last year to fulfill the commitment reflected in the Memorandum of Understanding (MoU) signed by the Spanish and European authorities on July 23.