The German banking and financial sector is a highly regulated
area, hence, the appointment of a supervisory member is a crucial
matter from a regulatory perspective.
The core provisions on vetting members of a supervisory body of
an institution are laid down in the German Banking Act
(Kreditwesengesetz – KWG), and specified by a guidance notice
and certain forms published by the German Financial Supervisory
Authority (Bundesanstalt für Finanzdienstleistungsaufsicht
The vetting provisions are based mainly on the European rules,
namely on (1) the Directive 2013/36/EU DIRECTIVE 2013/36/EU of the
European Parliament and of the Council of 26 June 2013, on access
to the activity of credit institutions and the prudential
supervision of credit institutions and investment firms, amending
Directive 2002/87/EC and repealing Directives 2006/48/EC and
2006/49/EC; and (2) the Regulation (EU) no. 575/2013 of the
European Parliament and of the council of 26 June 2013, on
prudential requirements for credit institutions and investment
firms, and amending Regulation (EU) No 648/2012.
In the following, the cornerstones of the requirements of
members of a supervisory body of a German institution should be
From a regulatory perspective, any member of a supervisory body
must be reliable, have the necessary expertise to fulfil his/her
control duty and the ability to assess and monitor the respective
business, and devote sufficient time to perform his/her duties
(Section 25d (para. 1) of the KWG).
For an appointment of a potential new member, his or her
reliability, expertise, and whether he or she has sufficient time,
will be assessed by BaFin and the Deutsche Bundesbank on a
Pursuant to the provisions of the KWG, expertise means that a
member of a supervisory body has the professional knowledge to
adequately control and supervise the management of the respective
institution. Hence, the person in question has to understand the
business carried out and be able to assess its risk. Therefore, the
potential member must be familiar with the most important legal
provisions relevant for the business. However, no specific
knowledge is required, but the member must be in a position to
recognise any need for advice.
A membership is not excluded because the respective expertise is
not given at the point in time of the application. There is an
option to acquire the required expertise through further
Furthermore, the respective member has to prove sufficient
reliability. Reliability in the meaning of the KWG will be assumed
in the absence of facts establishing a lack of reliability. In this
respect, the personal conduct and the business practices of the
member in relation to criminal, financial, property-related and
supervisory issues will be taken into account.
Also, a member has to disclose possible conflicts of interest
since a permanent conflict of interest can hinder someone from
performing his or her duties. Members must devote sufficient time
to perform their obligations, i.e., find a sufficient amount of
time for the excise of the supervisory body function. In this
context, the KWG restricts the number of mandates for a member to
supervise different institutions according to section 25d para. 3
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under Regulation (EU) No. 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories ("EMIR")...
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