The Council of Ministers has approved today the royal decree that modifies various rules regarding requirements of honorability, experience and good governance in credit institutions and other financial entities. This is about incorporating into the Spanish legal framework the recommendations of the European Banking Authority (EBA) in this regard, which means expanding current requirements and enhancing continuous control by both the Bank of Spain and the own entities
In November 2012, the EBA established a series of guidelines on the assessment of the suitability of directors and executives in credit institutions. Despite their non-binding nature, national supervisors must communicate if they comply with these recommendations before next 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 to, together with other measures, improve confidence in the financial system.
The rule affects banks, savings banks, credit unions, financial conglomerates, appraisal companies, financial credit institutions, payment entities and electronic money entities alike.
The royal decree expands the current levels of requirement for suitability in the exercise of the functions of director, general manager and assimilated. In terms of honorability, the supervisor will assess the professional trajectory, convictions for malicious crimes and the existence of investigations based on economic crimes. Regarding the consideration of malicious crimes, the Bank of Spain may seek the opinion of a commission of experts created for this purpose.
Regarding the experience requirements, not only the professional career but also the theoretical training will be assessed, particularly in the areas of banking and financial services. The evaluation will cover the whole council taking into account the different profile of its components and not only individually as before.
In matters of good governance, not only conflicts of interest derived from close or control links between natural or legal persons will be taken into account. Non-suitability will also be established based on the existence of conflicts of interest for the performance of past or present positions, personal and economic relationships with other members of the board of directors or the fact that a director cannot devote enough time to his duties. .
The entities will have a period of six months to replace the directors or managers who, in accordance with the new requirements in terms of commercial and professional honorability, knowledge, experience and good governance, must lose the necessary qualifications to perform their duties in the entity.
On the part of the supervisor, the Bank of Spain in this case, and the entities themselves will establish a 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 of regulatory level 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 comply with the commitment reflected in the Memorandum of Understanding (MoU) signed by the Spanish and European authorities on July 23.