ABBL’s views on internal governance: further clarity, consistency and proportionality are required

Key messages from the ABBL

• Support for EBA’s objectives: The ABBL underlines that its members fully support the EBA’s goal of strengthening governance across the EU financial sector. Sound internal governance arrangements are fundamental for both individual institutions and the banking system as a whole. We also welcome the introduction of a new, harmonised regime for the establishment and supervision of third-country branches.
• Reinforced governance requirements: The ABBL welcomes that the CRD reinforces governance obligations for institutions, emphasising the responsibility of the management body for sound governance arrangements; the importance of a strong supervisory function that challenges decision-making; the role of key function holders; and the need for a robust risk strategy, risk appetite and risk management framework.
• Need for proportionality and consistency: The ABBL stresses that this framework will only succeed if it remains proportionate, harmonised and adaptable to national governance frameworks and legislation.

However, certain provisions of the Draft Guidelines appear overly prescriptive and detailed, potentially transforming guidance into de facto binding requirements. Without careful calibration and clarification, they could add complexity and administrative burden without delivering tangible governance improvements.

Main proposals from the ABBL

• Ensure consistency with national laws and the diverse organisation of boards, while promoting harmonisation across Member States. Clarity around the respective roles of the management body in its management function and in its supervisory function, as defined in the CRD, is essential.
• Avoid any form of gold-plating in the proposed restrictions on combining board roles with current or past executive functions.
• Clarify requirements regarding the composition, duties and competencies of specialised board committees.
• Provide clearer rules on reporting lines—both at entity and consolidated levels—particularly relevant for branches and subsidiaries.
• Confirm the conditions under which the principles of segregation of duties are met when members of the management body in their management function also act as Heads of Internal Control Functions, thereby upholding the proportionality principle.
• Address concerns about the introduction of additional layers of administrative work and duplication linked to the new “mapping of duties”, and consider alternative proposals.
• Undertake a full review of the proposed description of the role of the Compliance Function and the duties of the Compliance Manager and Compliance Officer to ensure consistency across regulations.