Supervisors are always ready to highlight the importance of good governance as a prerequisite to good risk management. Banks and investment firms need to be aware that on 30 June 2018, the European Banking Authority (EBA) revised Guidelines on Internal Governance will replace the old GL 44 Guideline that dates from 2011. Compliance from 30 June 2018 is expected. They will impact both significant and less significant institutions as well as investment firms.
These guidelines are very similar in content to GL 44 but there are some additional requirements. In addition to governance arrangements, the establishment of a clearly defined risk culture, code of conduct, and processes to manage and avoid potential conflicts of interest is needed. The Guidelines are a crucial element to consider in designing the internal control framework and the three lines of defence.
Institutions need to review their current internal governance and control framework. Particular focus should be on the internal governance provisions in terms of a clearly defined risk culture; a strong risk management framework; robust risk oversight and alignment of the overall business strategy with the key policies of the institution.
For further questions or to find out how we can support your compliance effort, contact our Financial Services Advisory team and Prudential Risk experts.