Financial regulator explains how it evaluates officers in supervised entities
On 27 January 2020, the Polish financial regulator (Polish Financial Supervision Authority, “PFSA”) published a paper entitled “Methodology of Suitability Assessment of Officers in Supervised Entities” (“Methodology”). The document explains how PFSA assesses whether a person meets the fit and proper criteria for holding a position on a supervised entity’s governing bodies. Those who undergo the assessment include, without limitation, members of management boards and supervisory boards of banks, insurance companies, pension fund managers, investment fund managers and brokerage houses, as well as candidates for those offices.
What exactly makes one fit and proper?
The methodology contains a list of criteria for running the assessment. There are some common criteria for all assessed individuals, such as:
knowledge, skills and professional experience,
ability to warrant proper performance of duties,
combination of different positions and functions.
For each of these criteria, the Methodology contains a detailed instruction as to what elements should be considered in the assessment. For instance:
in terms of knowledge – there is information about the preferable academic background for officers of supervised entities and when education must be supplemented with additional training or specialist courses;
in terms of professional experience - it defines the minimum period of experience in managerial positions for an officer of a supervised entity, and states what periods are to be excluded from the calculation;
in terms of the ability to warrant proper performance – it explains that not only such aspects as criminal record or reputation are subject to assessment, but also such factors as the person’s financial standing, his/her behaviour in private, and personal traits such as courage and assertiveness;
in terms of time-commitment – what matters is not only the number of appointments, but also the scale and complexity of operations of the entities in which the appointee holds a position and their geographical location (e.g. how much time it takes to travel between locations and whether some duties can be performed remotely).
Who makes the assessment and when?
According to the Methodology, assessing the suitability of candidates for officers is not the exclusive domain of the PFSA, but also of the supervised entities themselves. The latter should perform such an assessment not only when an officer is first appointed, but also periodically. Besides, the Methodology also mentions a number of other situations where a suitability assessment is necessary (such as reappointment for a new term, change of the scope of duties, or discovery of a conflict of interests).