Article 22 of Directive 2006/48/EC requires that every credit institution shall have robust governance arrangements, which include a clear organisational structure with well-defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks it is or might be exposed to, adequate internal control mechanisms, including sound administrative and accounting procedures, and remuneration policies and practices that are consistent with and promote sound and effective risk management. Furthermore, Article 73 (3) of the same Directive requires that Article 22 is also applied to parent undertakings and subsidiaries on a consolidated or sub-consolidated basis.
Besides other enhancements, new chapters have been added on the transparency of the corporate structure, the role, tasks and responsibilities of the supervisory function, and on IT-systems and business continuity management.
The EBA expects competent authorities to implement the Guidelines on Internal Governance and to incorporate them within their supervisory procedures by 31 March 2012. As of that date, competent authorities should ensure that institutions effectively comply with the new Guidelines.
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