The EU published in late July 2011 proposals for a Directive and Regulation intended to replace the current Capital Requirements Directives 2006/48 and 2006/49. The corporate governance of banks and investment firms will be improved by this Directive and Regulation.
The proposals - widely known as CRD IV - are intended to implement Basel III but also contain additional provisions concerning bank governance. These governance provisions are found in articles 86 to 91 of the proposed Directive and cover a wide range of matters including:
- Roles of chief executive and chairman cannot be combined unless authorised by the regulator.
- No one individual can hold in excess of four non-executive directorships unless authorised by the regulator.
- Boards must have a policy promoting gender, age, geographical, educational and professional diversity on the board.
- Boards must undertake periodic effectiveness reviews and undertake steps to rectify any deficiencies.
- The European Banking Authority is to develop regulatory technical standards for assessing the suitability of board members.
- These standards are likely to cover such issues as: time commitment; adequate collective knowledge, skills and experience of the management body; director induction and director training. As yet it is not clear how much involvement the regulator will have in this area.
The new rules (an EU Regulation and an EU Directive implemented through each national law) should be in place by the end of 2012. Many rules will be phased in gradually to give banks and investment firms time to adjust and the rules will be fully effective from 2019.
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